While ads account for the bulk of revenue at most publishers, music streaming sites, and on apps, the subscription model is gaining traction.
The business model allows digital media companies to provide a premium experience that offers more than the basic, often ad-supported service level.
Subscriptions are enjoying a new prominence as a revenue model for digital content and apps. Internet companies are exploiting the opportunity to boost ARPU (average revenue per user), helped along by recurring payments from a subscriber base.
In this exclusive report from BI Intelligence we look at how prominent players in five separate categories have tried to build a subscription-based revenue stream alongside ad-based businesses: the categories are video, music, news publishing, social networks/messaging, and dating apps.
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Here are some of the key takeaways:
- Most companies operate on a "freemium model." Subscriptions typically operate alongside an advertising business.
- Success in freemium boils down to offering a core audience exclusive value that can only be accessed beyond a paywall. The key is to target the most loyal audiences, and sell them on an expanded offering — bundles of features or content — that they find irresistible.
- Some publishers and apps have had mixed results with subscriptions, and vary in terms of how hard they have pushed them. Part of the problem is that ad-dependent companies are worried about limiting audience if they pack away too much value into a subscription tier.
- The proportion of paying subscribers within the total user base varies considerably across digital media industries. Each category is obviously different, and won't face the same challenges and opportunities in dialing up the percentage of subscribers and subscription revenue. Here are some of the proportions of subscribers in apps' user bases: Spotify (25%), WhatsApp (21%), Pandora (5%), Match Group (5%), The New York Times (3%), and LinkedIn (2%).
In full, the report:
- Analyzes the most common subscription-based digital media revenue models
- Explores the drivers that allows some subscription or freemium business models to succeed
- Explains the revenue mix and business opportunities in several key digital media industries
- Outlines companies that have succeeded with subscription-based business models
To access the full report from BI Intelligence, sign up for a full-access 14-day trial here. Full-access members also gain access to new in-depth reports, hundreds of charts, as well as daily newsletters on the digital industry.
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